FINSUM

FINSUM

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(Washington)

The efforts to combat the fiduciary rule are numerous, including an encouraging new proposal out of the house which would replace the current rule with a new one to be drafted by the SEC (not the DOL). However, aside from this, it appears that advisors are going to have a lot more time and freedom as the current version of the DOL rule looks almost certain to be delayed well beyond its January 2018 implementation date; likely to the end of 2018 or beyond. The reason why is that even the DOL is considering major revisions, such as expanding the exempt transactions list, doing away with the private right of action clause, and allowing rollovers to be exempted.


FINSUM: There is so much going on to defeat the rule it is hard to imagine there will not be big changes. We hope the SEC-driven rule being pushed by the House comes to pass, but even if it doesn’t, we think the fiduciary rule will eventually end up being toothless.

(Washington)

Trump friends and foes alike—take notice, the biggest firestorm of the President’s career may be about to ignite. In an interview with the New York Times this week, Trump seems to have communicated that he is considering and may try to fire Robert Mueller, the special counsel hired to investigate the President’s ties to Russia, and his whole probe. Trump cannot fire him directly, according to the law, but he could fire the entire senior staff of the DoJ until he finds a replacement that would be willing to dismiss Mueller, so theoretically it is possible. The news follows the announcement that Mueller has expanded his probe into Trump’s private business transactions.


FINSUM: No matter whether you support Trump or not, this would cause an unbelievable political storm in Washington and likely with the public. Our own view is that Trump does not have any troubling connections to the Kremlin and he just needs to ride this misery out rather than reacting and making it worse.

(Washington)

Robert Mueller, the special counsel hired to investigate the Trump administration’s ties to Russia, has reportedly deepened its probe. Mueller’s investigation will also now include digging into Trump’s business transactions to ensure he has no illicit links to Russia. According a Bloomberg source, the expanded probe will include “Trump’s involvement in a controversial SoHo development in New York with Russian associates, the 2013 Miss Universe pageant in Moscow and Trump’s sale of a Florida mansion to a Russian oligarch in 2008”. Trump’s team argues such inquiries are beyond the remit of the investigation, but the situation is made fuzzy because Trump has had business dealings with Russia for years.


FINSUM: It is silly to expect a global real estate developer to not have had dealings with Russians. Hard to say where this will lead…

(Washington)

Senator John McCain, 80, was diagnosed with an aggressive form of brain cancer this week. The news has rocked Washington since its release, and seems to have greatly disturbed the political order. The reason why seems to be two-fold. Firstly, with McCain out, Republicans only have 51 senators in the Senate, a tiny margin. Secondly, McCain had been the foremost Russia hawk and the loudest in-party critic of Donald Trump, leading the moderate wing of the Republican party. If he is unable to return to his duties, it will leave a gaping whole in the party and the Senate. McCain was also seen as a stabilizing force in global politics as he has recently reached out internationally to smooth over tensions created by the President.


FINSUM: There is no doubt about it, McCain is a deeply respected political force in Washington, an anchor of American politics. His departure would change the whole landscape.

Friday, 21 July 2017 00:00

The Great Rotation May Be Starting

(New York)

It feels like years that we have been writing about the forthcoming “great rotation” in markets, or the big move out of fixed income and into equities. It has many times been predicted, and generally fallen far short of expectations. However, it may be about to occur, says Bloomberg. For the first time in a long while the risk-adjusted return on stocks has been outperforming bonds, a key factor in how the market might turn. “Flows do follow performance, and we know U.S. retail investors are less valuation-sensitive than smart-money investors … The increase in total returns from stocks, if it continues over the next couple of quarters, raises the prospect of a tipping point in asset allocation in favor of equities”, summarizes an equities analyst at Credit Suisse.


FINSUM: Perhaps a great rotation has not fully happened, but US average allocation to equities is near a long-term high, so it is not as if people have been holding back. We are still skeptical allocations are going to change much from here unless the Fed gets really active with hikes.

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